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Don't Be a Retirement Flunkee

Much of retirement planning is a multiple-choice test: Does your employer offer a pension plan? Yes/No/Um, I'll check on that. (Circle one.)

Easy enough, until you get to the essay questions: What intangible benefits of the workforce will you miss, and what will you do to replace them? What do you want to accomplish before you die? Will you find activities that will lead to new friendships, or will you concentrate on cultivating the old ones? (Please use the back of this sheet if you run out of room.)

Get those answers wrong and you could become a retirement flunkee.

How exactly do you get an "F" in Golden Years 101? A surprising number of people find life after leaving the 9-to-5 grind disappointing. My colleague Robert Brokamp delved into the reasons for these unexpected psychological and emotional voids in the May issue of the Rule Your Retirement newsletter. (On the RYR companion website, subscribers will find a quiz based on 30 of the most common personal "drivers" for a happy life based on the book Don't Retire, REWIRE!.)

Your financial readiness can have a huge impact on your retirement frame of mind. The foundation of retirement planning is knowing whether you'll be able to cover your expenses year in and year out. It doesn't take much to remove the guesswork from your future. Just look at the concrete paper trail you're currently creating. Today's expenses hint strongly at tomorrow's bills. Taking a gander at your checkbook register can answer a few of those retirement question marks.

What is your current spending? What are your job-related expenses, kid-related costs, insurance rates, mortgage payments and retirement plan contributions? Do you have any money set aside for emergencies? In short, what does it cost to be you?

Here's your homework:

1. Gather a month's worth of paychecks (or retirement account withdrawals if you're already retired). Voila! There's the income side of your ledger

2. Now add up the must-pay bills -- you know, the stuff that keeps food in your tummy, a roof over your head, and a comfortable indoor temperature of 71.3 degrees. These must-pay bills include your mortgage/rent, utility bills, insurance payments (take the annual cost and divide it by 12), and current retirement contributions (if you're still making them).

3. Subtract your must-pay bills from your income, and you have a cursory take on your current discretionary income - the money you have left over.

Now you have a really rough take on your current cash flow. The more specific you are, the fewer surprises will rear their ugly heads in the future.

Extra credit: What about the future costs of being you? Some back-of-the-envelope accounting will give you a sense of how far today's dollars will take you and whether you can afford to keep your shrink on speed-dial. Don't fret if the numbers say you're coming up short. For extra credit, contribute to your 2005 IRA (or open a discount brokerage account if you haven't got one already). Already, we're willing to give you an "A" for effort.

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